Facebook shares slide amid slowing growth

(MoneyWatch) Facebook's (FB) stock price plunged in after-hours trading Thursday following the social networker's release of its first earnings report.

At one stage, shares were down 10 percent to $24.12. Although the company's $1.18 billion in sales for the quarter beat analyst expectations and were up nearly one-third from the year-ago period, Facebook's growth appeared to disappoint Wall Street, which expects the company to justify its $57.4 billion market capitalization.

Facebook is a leading social networking and Internet company. Investors expect such companies to show rapid growth for an extended period of time. For example, last quarter Google (GOOG) grew revenue by 21 percent year-over-year. Apple (AAPL), which had a relatively bad quarter for the company, saw its sales grow only 23 percent compared with the year-ago period.

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Facebook U.S. unique users down 4.8% in 6 months

By comparison, Facebook sales are up 32 percent year-over-year. But the company is far less mature than either Apple or Google, which means it should be growing faster than other tech giants. More importantly for investors, Facebook's rate of growth seems to be slowing.

The data for the graph below comes from Facebook's public filings with the SEC. The blue line shows actual announced revenue, while the black one uses a two-month moving average to smooth out the quarterly bumps and highlight the company's underlying growth trend.

Erik Sherman

Note that while Facebook's revenue is growing, the rate of growth is leveling off. That could be related to Facebook's overall drop in U.S. unique visitors over the last six months. Even though the company saw monthly average users increase 29 percent year-over-year to 955 million, North American users have provided half of the company's revenue. Expansion elsewhere in the world is not as profitable for the social network.

In fact, the average amount of quarterly revenue Facebook generates per user is another cause for concern. That figure in the last quarter was $1.24, which on annual basis comes to $4.96 per user. That's down from 2011, when the company generated an average of $5.11 in revenue per user. Although Facebook's growing user base helps mask that decline, if it continues it will eventually become more obvious -- and painful to investors.

[nohater]

don't get facebook, never have understood the masses needing such a thing. it must feed the narcissistic needs of many. wonder what else could be to make so many be on facebook. meanwhile zuckerberg laughs all the way to the bank. as for investors, don't get that either as fb produces no products, no tangible services. all fb does is provide a virtual bulletin board for the masses.

[WakeUpPeople001]

Here's a clue...

Facebook and shows such as "American Idol" fulfill a similar need for the masses.

[Kieren1]

Facebook was and still is vastly overvalued ...

[RichZubaty]

Facebook is a joke. But what's wrong with Wall Street? Sales up 32% over a year ago and that's not good enough? Socialism now! End this greed-driven economy that can't even shelter its people. People over profit.

[Jhihmoac]

Didn't the peeps @ Facebook stress the fact that its shares were more geared for the long-term?

...Everybody wants the fast, easy money - SHEESH!

[hypnotoad72]

mitch0927 -

Or sell while the stocks remain high...

Since 2007's crash and the wrong-side's bailout, the stock market's epithet of "rigged casino" started to feel more and more like a truism.

After all, even then, Enron and its execs in 2001 told employees to invest was a safe bet for the long term (before the execs started cashing out, patterns patterns...)

And, in this messy new normal, of course people want fast money... /riddle

[eriksherman]

They have said that they focus on the service and don't worry about the money. However, when you take as much in venture capital and push for as high a market cap as Facebook did, you're saying something quite different to investors.